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A nonparametric method for valuing new goods

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Abstract

This paper presents a revealed preference method for calculating a lower bound on the virtual or reservation price of a new good and suggests a way to improve these bounds by using budget expansion paths. This allows the calculation of cost-of-living and price indices when the number of goods available changes between periods. We apply this technique to the UK National Lottery and illustrate the effects of its inclusion in measures of inflation. JEL Classification: C43; D11.

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 143.

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Length: 57 pages
Date of creation: May 2002
Date of revision:
Handle: RePEc:ecb:ecbwps:20020143

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Keywords: Cost-of-living indices; new goods; GARP.;

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  1. Richard Blundell & Frank Windmeijer, 2000. "Identifying demand for health resources using waiting times information," IFS Working Papers W00/03, Institute for Fiscal Studies.
  2. Hardle, W., 1992. "Applied Nonparametric Methods," Discussion Paper 1992-6, Tilburg University, Center for Economic Research.
  3. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-73, July.
  4. Oliver LINTON, . "Applied nonparametric methods," Statistic und Oekonometrie 9312, Humboldt Universitaet Berlin.
  5. Farrell, Lisa & Walker, Ian, 1999. "The welfare effects of lotto: evidence from the UK," Journal of Public Economics, Elsevier, vol. 72(1), pages 99-120, April.
  6. Javier Ruiz-Castillo & Eduardo Ley & Mario Izquierdo, . "The plutocratic bias in the CPI: Evidence from Spain," Studies on the Spanish Economy 60, FEDEA.
  7. Varian, Hal R, 1983. "Non-Parametric Tests of Consumer Behaviour," Review of Economic Studies, Wiley Blackwell, vol. 50(1), pages 99-110, January.
  8. Whitney K. Newey & James L. Powell & Francis Vella, 1999. "Nonparametric Estimation of Triangular Simultaneous Equations Models," Econometrica, Econometric Society, vol. 67(3), pages 565-604, May.
  9. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
  10. Neary, J.P & Roberts, K.W.S, 1978. "The Theory of Household Behaviour under Rationing," The Warwick Economics Research Paper Series (TWERPS) 132, University of Warwick, Department of Economics.
  11. Beach, Charles M & Davidson, Russell, 1983. "Distribution-Free Statistical Inference with Lorenz Curves and Income Shares," Review of Economic Studies, Wiley Blackwell, vol. 50(4), pages 723-35, October.
  12. Richard Blundell & Alan Duncan & Krishna Pendakur, 1998. "Semiparametric estimation and consumer demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(5), pages 435-461.
  13. Pollak, Robert A., 1981. "The social cost of living index," Journal of Public Economics, Elsevier, vol. 15(3), pages 311-336, June.
  14. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
  15. Pendakur, Krishna, 1998. "Semiparametric estimates and tests of base-independent equivalence scales," Journal of Econometrics, Elsevier, vol. 88(1), pages 1-40, November.
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